I would say the real and more fundamental problem is the anti-competitive behavior. This is what makes their corporate censorship as powerful as it is.

There are far bigger concerns with data harvesting than simple ad targeting.

You don’t need to either/or these 2 concepts. Societies always have some amount of negative and positive freedoms. In Germany it’s illegal to do the Nazi salute in public, which is a form of ideological censorship, but there’s a valid, widely accepted reason for that. On the other hand, privacy is a Human Right, so there’s also wide consensus as to its value. Violating the privacy of the masses, in order to sell more products, is not exactly something that is very defensible because we collectively seem to find it unethical.

The question-begging in your comment is astounding. Who decides that a certain level of public control over individual behavior is acceptable? Who decides what counts as privacy? I don't really care what Germany does. I'm not German and I didn't vote for the EU's GDPR or Germany's speech laws. And there sure as hell isn't a broad consensus in the US that tech censorship is okay despite activists trying to pretend that there is.

I have adopted Scott Galloway's analogy to tobacco.

Gamification is the nicotine, ad targeting is the tar of social media.

Why would facebook pay other companies for data about its users?

My question remains: what, exactly, are the demonstrable harms that come to users as a result of the tracking needed for ad targeting, and how do these harms (if they exist at all) justify our current privacy moral panic and overregulation response?

During the Nazi regime, written records of people’s religious affiliation were used to target and detain Jewish individuals. I know it’s far-fetched in the current world, but there is little defensible reason for corporations (or governments!) to hold that much information about individuals.

It’s also been documented that lack of privacy has a chilling effect in public discourse, whistleblowing, and other activities where you’d expect a reasonable level of privacy.

It’s not 100% privacy vs. none, but at the moment Facebook and Google are both very, very close to ultimate knowledge about an individual.